It’s a pile of rubbish for flashy tech stocks, and it’s time to bet on old stocks. That at least seems to be Jim Cramer’s latest advice for investors. The host of the popular CNBC ‘Mad Money’ says that investors need to accept the “new reality” in which tech names are cast aside in favor of a more classic collection of the market. stock market.
“It’s the old guard’s revenge right now, right here,” Cramer said. “All sorts of conventional, boring companies are recapturing the market while digitizers and disruptive devices are burning through.”
Cramer has put together a list of names he thinks investors should lean on and following in his footsteps we’ve dived into TipRanks database and see the details of his two picks. Do Street analysts think the Cramer nominees make the right investment choices right now? Let’s find out together.
Raytheon Technologies (RTX)
If we’re talking about the “old guard,” the first Cramer pick we’ll be looking at definitely fits the bill. Founded a century ago, Raytheon Technologies is one of the largest aerospace and defense manufacturers in the world and boasts a market capitalization of $141 billion.
The company provides systems and technology services to government, military and commercial customers globally. Its business consists of four main divisions: Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. How big is Raytheon? Yes, it has 174,000 employees on the payroll, which is huge.
The kind of value proposition it offers is one that you would think would relatively shield it from the current negative market conditions, and indeed while most suffered at the hands of the bears in By 2022, the stock is up 13% so far. outstripping the S&P 500’s 21% drop.
That said, it’s not all smooth sailing. The company missed top expectations in its recently released third-quarter results. At $17 billion, that’s $250 million above analysts’ forecasts. Macro issues also weighed on the outlook, with the company lowering its revenue forecast for the year from around $67.75-$68.75 billion to $67.0-$67.3 billion.
Against those negative trends, however, the profit profile appears in good shape. Raytheon has delivered tuning. EPS was $1.21, beating the Street’s $1.14 call of $0.07. At the same time, the company increased its full year adj. EPS outlook from $4.60 – $4.80 to $4.70 – $4.80.
When benefiting from a large market, Raytheon pays a reliable dividend. The quarterly payout is now at $0.55, $2.20 annually, and yields 2.3%.
While stocks have outperformed the market this year, Morgan Stanley Kristine Liwag The stock is still undervalued.
“We continue to see growth in RTX’s commercial aerospace business as commercial aftermarket remains a bright spot with airlines continuing to add capacity and global air traffic. demand remained at ~65% of 2019 (August 2022 vs August 1st 2019). We also see the business as a benefactor from increasing production rates at Boeing and Airbus,” emphasized Liwag.
“Given the backdrop of RTX end-markets, we see today’s undervalued stock trading at ~17x our 2023E EPS. This puts the stock at a net discount. compared to its defense industry peers and did not consider the magnitude of the increase from the commercial aerospace recovery,” the analyst added.
Accordingly, Liwag rates RTX stock at Overweight (i.e. Buy) while her $119 price target leaves room for 24% growth in one year. (To see Liwag’s achievements, click here)
Overall, we’re reviewing here a stock with a Buy Moderate consensus rating. RTX has 11 analyst reviews on file, including 8 buys and 3 holds. (View RTX stock forecast on TipRanks)
Boeing (father)
From one A&D giant to another. Cramer alma mater’s second proposal is Boeing. The group, which is the largest U.S. exporter, manufactures commercial aircraft as well as space systems, aviation components, and defense equipment.
Boeing is one of the stock market giants but, as has been well documented, has had similar troubles over the past few years, notably the two crashes of the 737 Max in late 2018. and early 2019 caused this passenger plane to lose almost twice. many years. The company also almost went bankrupt during the pandemic.
So the past few years have been a bit rough, and although the company missed expectations in its latest quarterly report and once again cut its estimate of 737 deliveries, things are generally looking good. better – more aircraft were delivered by the company in 2022 than all of 2021. In addition, the A&D giant later revealed a new order from Emirates – a key customer in the Middle East.
Elsewhere, BA’s recent Investment Day was a celebratory event. The company says it expects free cash flow of $1.5 billion to $2 billion for 2022. Consensus estimate is just $670.3 million.
Among those adapting to the bullish approach is Kristine Liwag of Morgan Stanley (which also includes RTX), who believes the worst lies behind the company.
“We left Boeing Invest Day on the stock increasingly positive as the company provided unexpected support details for a clear and reliable path to $10 billion in free cash flow. … What is clear to us is that although Boeing still has a lot of work to do (stabilize supply chains, get planes off inventory, prepare for the next rate cut in BCA, etc.) The worst is behind the company and we are now in a period of positive free cash flow. We forecast free cash flow of $8.9 billion in 2025 and $9.1 billion in 2026,” Liwag wrote.
“We recognize that Boeing is a ‘show me’ story and could have the opposite effect of our estimates if they hit the milestones,” the Morgan Stanley analyst summarized.
How does all this translate to investors? Liwag sticks with an Overweight (i.e. Buy) rating on Boeing stock, while her $213 price target implies a ~27% gain a year from now.
Now on to the rest of the Street, where the consensus analyst rates the stock as a Moderate Buy, based on 11 Buys, 3 Holds and 1 Sell. (View Boeing stock forecast on TipRanks)
To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best stocks to buya tool that consolidates all TipRanks equity insights.
Disclaimer: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important to do your own analysis before making any investments.
